"If Clinton looks like she's going to win, the market likes it. If Clinton's party looks like it wins, the market doesn't like it. That's one of the oddities we've got going," said James Paulsen, CIO for Wells Capital Management. "The election will create volatility short-term but I don't think it will matter over the next year, unless one party gets triple power."
Stocks should respond to earnings in the week ahead. Major banks reported profits Friday, and earnings for
JPMorgan,
Wells Fargo, Citigroup and PNC came in above expectations.
"I think we're going to see earnings momentum," said Paulsen, adding it's likely earnings comparisons will be positive for the first time in five quarters. He also expects to see global economic growth pick up. "I think that's coming together. … I'm not saying rapid growth, but just enough that shows we turned the corner in the global recovery, and that would be just at a time when earnings are coming through."
Paulsen said if earnings and the economy do pick up, so should stocks.
"I think we're breaking north. It's our next big move. It might have to be after the election," he said.
Fed speakers will also be of interest in the coming week, after traders took comments from
Fed Chair Janet Yellen Friday to suggest she would like to hold rates low for even longer. Yellen said there could be benefits to a "high-pressure economy," which was taken to mean the Fed could hold off on rate hikes, and let inflation pickup to stimulate the economy.
The market is anticipating a December rate hike, particularly after the Fed's minutes from its September meeting showed a divided Fed with a number of members eager to raise rates.
After Yellen's dovish comments Friday,
New York Fed President William Dudley swung the market's view another way when he told
The Wall Street Journal that he expects a rate hike this year. He also said the 10-year Treasury yield seems low and was not reflecting the economy's pace of growth, The 10-year yield rose after his late afternoon remarks, ending the week near 1.80 percent, a level it reached this past week for the first time since early June.
Dudley will speak again in the coming week, but Fed Vice Chair Stanley Fischer also speaks, at the Economic Club of New York on Monday. Fischer, along with Dudley and Yellen, is seen as a critical member at the dovish core of the Fed.
"Any views around inflation risks will be important to see how comfortable these core members feel about a near term hike," said Emanuella Enenajor, senior North America economist at Bank of America Merrill Lynch.
Enenajor said Yellen was misunderstood Friday. "I don't think she was sending the signal the markets interpreted," she said. "She's not suggesting that as a potential policy course. … She mentioned it as an academic question."
Even aside from Fed speakers, inflation will be an important topic, with CPI Tuesday.
"We're looking for 0.3 percent headline. Core up 0.1 percent. We had a strong reading of 0.3 last month. The health care piece was unusually strong. There's a couple of places where we could have a reversal, some payback. That's why we're in the camp of 0.1 on core," said Enenajor.
She expects CPI inflation at a 1.5 percent year over year pace in September.
Inflation is one of the Fed's two mandates, and it has targeted a 2 percent level. The Fed's favorite inflation measure is the PCE deflator, running at about 1.7 percent, but the Consumer Price Index shows core inflation has been running above 2 percent, even if headline inflation is lower. Enenajor said by the time November CPI is reported, the headline number could be 2 percent just based on the fact that oil prices were so low last year.
"The big push from oil comes in February. We think it could get to a high 2 percent. It's temporary but it's confirmation that a lot of the weakness we had in inflation was driven by energy," she said.
Besides the Fed, the European Central Bank will be of interest. It holds a rates meeting Thursday and ECB President Mario Draghi speaks after the meeting.
Also in the coming week, CNBC's "
Fast Money Halftime Report" is celebrating its five-year anniversary, featuring an all-star lineup with some of the biggest names in investing. At noon on Monday, David Tepper, Carl Icahn and
Jeffrey Gundlach join the show. Other guests during the week include Marc Lasry, Nelson Peltz and Jim Chanos.
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